Last week, President Obama released the White House’s National Security Strategy, which included a key goal: obtaining Trade Promotion Authority (TPA) from the World Trade Organization. But the benefits of obtaining TPA are unclear. And in many ways, this strategy does not address the most pressing challenge facing our country – growing trade deficits. So, if the United States is determined to remain competitive, then it must develop an aggressive strategy to fight unfair foreign competition.
The Biden Administration is likely to revisit the Phase One trade deal, stressing that China must uphold the provisions of the agreement or it will be retaliated with tariffs. The Trump Administration has implemented Section 301 tariffs on $360 billion in Chinese imports, citing unfair practices and forced technology transfer. But before the tariffs were imposed, the United States and China had reached an agreement to cut nontariff barriers and reform unfair trade practices.
Although it is likely that Southeast Asian governments will reject U.S. demands for digital trade without greater access to their markets, some may sign on to a standalone digital economy effort. The benefits of the digital economy could be offered to partners in the supply chain and infrastructure pillars. This could make U.S.-favored digital standards more attractive in future trade negotiations. The Biden administration’s push to create digital economy incentives could be a partial solution.
The Biden administration has been focusing on larger economies in Southeast Asia, including China, while leaving smaller economies out. By separating digital negotiations from other issues like trade, the Biden administration is shutting out Cambodia and Laos, two countries that will soon be ASEAN chairman. Ultimately, however, the U.S.-China relationship is not as easy as it seems. But the Biden administration’s IPEF strategy is a strategic move toward greater trade relations.
But IPEF will not do any of that for free. It will merely enable the United States to leverage existing trade deals and pursue new ones. Trade deals give large economies the leverage to influence regional trade and consolidate trade practices. China is an increasingly influential and fast-growing economy in the Indo-Pacific region, and has even applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTP) and the Regional Comprehensive Economic Partnership (RCEP).
If the Biden Administration is serious about advancing preferred standards, it should use the framework to make the case. However, it should avoid framing this framework as an anti-China strategy. The Indo-Pacific economies maintain extensive economic ties with China, and the biden administration needs to keep in mind that these ties cannot be ignored. This strategy should not be a substitute for protectionist trade policies. The Biden administration is likely to follow the Trump Administration’s path in protecting our interests.
The Biden administration has also sought to bolster global digital trade by establishing a joint working group between the United States and Singapore in June 2021. It has also signed a letter of intent with the United Kingdom on digital trade. These efforts illustrate a tension between benefits of digital trade and concerns of cybercrime, both of which have similar implications. The Biden administration’s decision to forgo a traditional trade agreement in favor of a more inclusive and digital trade approach will be scrutinized closely.